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Why did you spend $168,442 on coffee and lunch?

If you have ever read, “The Millionaire Next Door,” you would know that one of the most important habits of the wealthy is that they track their expenses. They carefully plan and budget every dollar. Why then, do the majority of people across the income spectrum not track and budget their money? We tend to throw our hands in the air, and just hope for the best. We hope that we won’t have a major costly repair this month, or that our kids will get a scholarship for college. We hope that we will hit the lottery. We hope that we will stay in good health. We hope that we will have enough for retirement. This is called, “The future-self problem.”

My husband came up with this term years ago, as he would jokingly say, “That’s a future Brian problem.” What we don’t realize is whether it’s present-day self or future-self, it’s still our problem either way. We can’t keep hoping that we will have enough, because with that kind of planning, chances are that we won’t. Without tracking our expenses, we aren’t able to determine where we may be over-spending. By creating a budget, not only can we stay focused on our goals, but we can learn to cut unnecessary expenses. That $3 coffee you get on your way to work and at lunch is costing you $120 a month. Going out for lunch? $200 a month! Here’s the beauty, you don’t have to deprive yourself of coffee or lunch. Eat your Reuben sandwich and drink your peppermint coffee, but make your own and bring it to work. Pocket that extra $320 a month. Hey, with an average 7% return rate, that could give you $168,442 in 20 years. Imagine what other expenses you could cut? Over the years since we started budgeting, our savings rate has grown each year. This has largely been due to tracking our expenses, and cutting wasteful spending. We are now averaging a 35% savings rate. Do you know your savings rate?